UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended June 30, 2020

 

OR

 

[  ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from to

 

Commission file number: 001-38418

 

COCRYSTAL PHARMA, INC.

(Exact name of registrant as specified in its charter)

 

Delaware   35-2528215
(State or Other Jurisdiction of   (I.R.S. Employer
Incorporation or Organization)   Identification No.)

 

19805 North Creek Parkway Bothell, WA   98011
(Address of Principal Executive Office)   (Zip Code)

 

Registrant’s telephone number, including area code: (786) 459-1831

 

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [  ]

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (Sec.232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes [X] No [  ]

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

 

Large accelerated filer [  ] Accelerated filer [  ]
       
Non-accelerated filer [X] Smaller reporting company [X]
       
Emerging growth company [  ]    

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [  ]

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes [  ] No [X]

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of Each Class   Trading Symbol(s)   Name of each exchange on which registered
Common Stock   COCP  

The Nasdaq Stock Market LLC

(The Nasdaq Capital Market)

 

As of August, 6, 2020, the number of outstanding shares of the registrant’s common stock, par value $0.001 per share, was 52,140,699.

 

 

 

 

 

 

COCRYSTAL PHARMA, INC.

 

FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 2020

 

INDEX

 

Part I - FINANCIAL INFORMATION  
Item 1.  
Condensed Consolidated Balance Sheets F-1
Condensed Consolidated Statements of Operations F-2
Condensed Consolidated Statements of Stockholders’ Equity F-3
Condensed Consolidated Statements of Cash Flows F-4
Notes to the Condensed Consolidated Financial Statements F-5
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 3
Item 3. Quantitative and Qualitative Disclosures About Market Risk 7
Item 4. Controls and Procedures 7
Part II - OTHER INFORMATION  
Item 1. Legal Proceedings 8
Item 1.A. Risk Factors 9
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 9
Item 3. Defaults Upon Senior Securities 9
Item 4. Mine Safety Disclosures 9
Item 5. Other 9
Item 6. Exhibits 9
SIGNATURES 11

 

 

 

 

Part I – FINANCIAL INFORMATION

 

COCRYSTAL PHARMA, INC.

 

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except per share data)

 

    June 30, 2020     December 31, 2019  
    (unaudited)        
Assets                
Current assets:                
Cash   $ 19,315     $ 7,418  
Restricted cash     50       50  
Accounts receivable     592       644  
Prepaid expenses and other current assets     145       169  
Total current assets     20,102       8,281  
Property and equipment, net     660       431  
Deposits     35       50  
Operating lease right-of-use assets, net (including $64 to related party)     589       677  
Goodwill     19,092       19,092  
Total assets   $ 40,478     $ 28,531  
Liabilities and stockholders’ equity                
Current liabilities:                
Accounts payable and accrued expenses   $ 2,640     $ 1,999  
Current maturities of finance lease liabilities     39       103  
Current maturities of operating lease liabilities (including $59 to related party)     187       177  
Derivative liabilities     77       7  
Total current liabilities     2,943       2,286  
Long-term liabilities:                
Finance lease liabilities     54       14  
Operating lease liabilities (including $40 to related party)     426       523  
Total long-term liabilities     480       537  
Total liabilities     3,423       2,823  
Commitments and contingencies                
Stockholders’ equity:                
Common stock, $0.001 par value; 100,000 shares authorized as of June 30, 2020 and December 31, 2019; 52,141 and 35,150 shares issued and outstanding as of June 30, 2020 and December 31, 2019, respectively     53       36  
Additional paid-in capital     277,747       260,932  
Accumulated deficit     (240,745 )     (235,260 )
Total stockholders’ equity     37,055       25,708  
Total liabilities and stockholders’ equity   $ 40,478     $ 28,531  

 

See accompanying notes to condensed consolidated financial statements.

 

F- 1

 

 

COCRYSTAL PHARMA, INC.

 

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

(in thousands, except per share data)

 

    Three months ended
June 30,
    Six months ended
June 30,
 
    2020     2019     2020     2019  
                         
Revenues:                                
Collaboration revenue   $ 554     $ 592     $ 1,015     $ 5,670  
      554       592       1,015       5,670  
Operating expenses:                                
Research and development     1,976       1,091       3,259       1,969  
General and administrative     2,028       1,051       3,167       2,374  
Total operating expenses     4,004       2,142       6,426       4,343  
                                 
Income (loss) from operations     (3,450 )     (1,550 )     (5,411 )     1,327  
                                 
Other (expense) income:                                
Interest expense, net     (2 )     (5 )     (4 )     (11 )
Change in fair value of derivative liabilities     (43 )     40       (70 )     140  
Total other income, net     (45 )     35       (74 )     129  
Net income (loss)   $ (3,495 )   $ (1,515 )   $ (5,485 )   $ 1,456  
                                 
Net income (loss) per common share, basic and diluted   $ (0.07 )   $ (0.05 )     (0.12 )     0.05  
Weighted average number of common shares outstanding, basic    

52,141

     

31,621

     

46,930

     

30,986

 
Weighted average number of common shares outstanding, diluted     52,141       31,621       46,930       31,006  

 

See accompanying notes to condensed consolidated financial statements.

 

F- 2

 

 

COCRYSTAL PHARMA, INC.

 

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(unaudited)

(in thousands)

 

    Common Stock     Additional
Paid-in
    Accumulated     Total
Stockholders’
 
    Shares     Amount     Capital     Deficit     Equity  
Balance as of December 31, 2019     35,150     $ 36     $ 260,932     $ (235,260 )   $   25,708  
Stock-based compensation     -       -       107       -       107  
Sale of common stock, net of transaction costs     16,991       17       16,589       -       16,606  
Net loss     -       -       -       (1,990 )     (1,990 )
Balance as of March 31, 2020     52,141     $ 53     $ 277,628     $ (237,250 )   $ 40,431  
Stock-based compensation     -       -       119       -       119  
Net loss     -       -       -       (3,495 )     (3,495 )
Balance as of June 30, 2020     52,141     $ 53     $ 277,747     $ (240,745 )   $ 37,055  

 

    Common Stock     Additional
Paid-in
    Accumulated     Total
Stockholders’
 
    Shares     Amount     Capital     Deficit     Equity  
Balance as of December 31, 2018     29,938     $ 30     $ 253,949     $ (187,091 )   $   66,888  
Stock-based compensation     -       -       33       -       33  
Sale of common stock, net of transaction costs     1,683       2       3,926       -       3,928  
Net income     -       -       -       2,971       2,971  
Balance as of March 31, 2019     31,621       32       257,908       (184,120 )     73,820  
Stock-based compensation     -       -       113       -       113  
Net loss     -       -       -       (1,515 )     (1,515 )
Balance as of June 30, 2019     31,621     $ 32     $ 258,021     $ (185,635 )   $ 72,418  

 

See accompanying notes to condensed consolidated financial statements.

 

F- 3

 

 

COCRYSTAL PHARMA, INC.

 

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

(in thousands)

 

    Six months ended
June 30,
 
    2020     2019  
             
Operating activities:                
Net income (loss)   $ (5,485 )   $ 1,456  
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:                
Depreciation and amortization expense     68       45  
Operating lease expense     88       72  
Stock-based compensation     226       146  
Interest expense, net     -       11  
Payments on operating lease liabilities     (87 )     (53 )
Gain on settlement of mortgage note receivable     -       -  
Change in fair value of derivative liabilities     70       (140 )
Deferred income tax benefit     -       -  
Changes in operating assets and liabilities:                
Accounts receivable     52       (914 )
Prepaid expenses and other current assets     24       96  
Deposits     15       (10 )
Accounts payable and accrued expenses     641       284  
Deferred rent     -       (3 )
Net cash provided by (used in) operating activities     (4,388 )     990  
                 
Investing activities:                
Purchases of property and equipment     (220 )     (29 )
Proceeds from settlement of mortgage note receivable     -       -  
Net cash (used in) provided by investing activities     (220 )     (29 )
                 
Financing activities:                
Payments on finance lease liabilities     (101 )     (117 )
Proceeds from sale of common stock, net of transaction costs     16,606       3,928  
Net cash provided by financing activities     16,505       3,811  
                 
Net increase in cash and restricted cash     11,897       4,772  
Cash and restricted cash at beginning of period     7,468       2,752  
Cash and restricted cash at end of period   $ 19,365     $ 7,524  
                 
SUPPLEMENTAL DISCLOSURE OF NON-CASH FINANCING ACTIVITIES:                
Recognition of finance lease right-of-use asset and liability   $ 77     $ -  
Recognition of operating lease right-of-use assets and operating lease liabilities upon adoption of ASC Topic 842, Leases   $ -     $ 833  

 

See accompanying notes to condensed consolidated financial statements.

 

F- 4

 

 

COCRYSTAL PHARMA, INC.

 

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

1. Organization and Business

 

Cocrystal Pharma, Inc. (“we”, the “Company” or “Cocrystal”), a biopharmaceutical company incorporated in Delaware, has been developing novel technologies and approaches to create first-in-class or best-in-class antiviral drug candidates since its initial funding in 2008. Our focus is to pursue the development and commercialization of broad-spectrum antiviral drug candidates that will transform the treatment and prophylaxis of viral diseases in humans. By concentrating our research and development efforts on inhibiting viral replication, we plan to leverage our infrastructure and expertise in these areas.

 

The Company’s activities since inception have principally consisted of acquiring product and technology rights, raising capital, and performing research and development. Successful completion of the Company’s development programs, obtaining regulatory approvals of its products and, ultimately, the attainment of profitable operations is dependent on future events, including, among other things, its ability to access potential markets, secure financing, develop a customer base, attract, retain and motivate qualified personnel, and develop strategic alliances. Through June 30, 2020, the Company has primarily funded its operations through equity offerings.

 

2. Basis of Presentation and Significant Accounting Policies

 

Basis of Presentation

 

The accompanying condensed consolidated financial statements have been prepared in accordance with United States generally accepted accounting principles (“U.S. GAAP”) for interim financial information, the instructions to Form 10-Q and Article 10 of Regulation S-X set forth by the Securities and Exchange Commission (“SEC”). They do not include all of the information and notes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. The results of operations for the interim periods presented are not necessarily indicative of the results of operations for the entire fiscal year. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company’s annual report on Form 10-K for the year ended December 31, 2019 filed on March 27, 2020 (“Annual Report”).

 

Principles of Consolidation

 

The consolidated financial statements include the accounts of Cocrystal Pharma, Inc. and its wholly owned subsidiaries: Cocrystal Discovery, Inc., Cocrystal Merger Sub, Inc., Baker Cummins Corp. and Biozone Laboratories, Inc. Intercompany transactions and balances have been eliminated.

 

Segments

 

The Company operates in only one segment. Management uses cash flows as the primary measure to manage its business and does not segment its business for internal reporting or decision-making.

 

Use of Estimates

 

Preparation of the Company’s consolidated financial statements in conformance with U.S. GAAP requires the Company’s management to make estimates and assumptions that impact the reported amounts of assets, liabilities, revenues and expenses, and the disclosure of contingent assets and liabilities in the Company’s consolidated financial statements and accompanying notes. The significant estimates in the Company’s consolidated financial statements relate to the valuation of equity awards and derivative liabilities, recoverability of deferred tax assets, estimated useful lives of fixed assets, and forecast assumptions used in the valuation of intangible assets and goodwill. The Company bases estimates and assumptions on historical experience, when available, and on various factors that it believes to be reasonable under the circumstances. However, if future results are not consistent with our estimates and assumptions, including as a result of the COVID-19 global pandemic, then we may be exposed to an impairment charge, which could be material. The Company evaluates its estimates and assumptions on an ongoing basis, and its actual results may differ from estimates made under different assumptions or conditions.

 

F- 5

 

 

Concentrations of Credit Risk

 

Financial instruments that potentially subject the Company to significant concentrations of credit risk consist primarily of cash deposited in accounts held at two U.S. financial institutions, which may, at times, exceed federally insured limits of $250,000 for each institution accounts are held. At June 30, 2020 and December 31, 2019, our primary operating account held approximately $19,315,000 and $7,418,000, respectively, and our collateral account balance was $50,000 at a different institution. The Company has not experienced any losses in such accounts and believes it is not exposed to significant risks thereof.

 

As of June 30, 2020, 100% of our revenue and receivables are from one customer, Merck Sharp & Dohme Corp. (“Merck”).

 

Fair Value Measurements

 

FASB Accounting Standards Codification (“ASC”) 820 defines fair value, establishes a framework for measuring fair value under generally accepted accounting principles and enhances disclosures about fair value measurements. Fair value is defined under ASC 820 as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value under ASC 820 must maximize the use of observable inputs and minimize the use of unobservable inputs. The standard describes a fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the last unobservable, that may be used to measure fair value which are the following:

 

  Level 1 — quoted prices in active markets for identical assets or liabilities.
   
  Level 2 — other significant observable inputs for the assets or liabilities through corroboration with market data at the measurement date.
   
  Level 3 — significant unobservable inputs that reflect management’s best estimate of what market participants would use to price the assets or liabilities at the measurement date.

 

The Company categorizes its cash and restricted cash as Level 1 fair value measurements. The Company categorizes its warrants potentially settleable in cash as Level 2 fair value measurements. The warrants potentially settleable in cash are measured at fair value on a recurring basis and are being marked to fair value at each reporting date until they are completely settled or meet the requirements to be accounted for as component of stockholders’ equity. The warrants are valued using the Black-Scholes option pricing model as discussed in Note 7 – Warrants.

 

At June 30, 2020 and December 31, 2019, the carrying amounts of financial assets and liabilities, such as cash, accounts receivable, other assets, and accounts payable and accrued expenses approximate their fair values due to their short-term nature. The carrying values of notes payable and lease liabilities approximate their fair values due to the fact that the interest rates on these obligations are based on prevailing market interest rates.

 

The Company’s derivative liabilities are considered Level 2 measurements.

 

Goodwill

 

In November 2014, goodwill was recorded in connection with the acquisition of RFS Pharma.

 

We evaluate indefinite-lived intangible assets and goodwill for impairment annually, as of November 30, or more frequently when events or circumstances indicate that impairment may have occurred. As part of the impairment evaluation, we may elect to perform an assessment of qualitative factors. If this qualitative assessment indicates that it is more likely than not that the fair value of the indefinite-lived intangible asset or the reporting unit (for goodwill) is less than its carrying value, we then would proceed with the quantitative impairment test to compare the fair value to the carrying value and record an impairment charge if the carrying value exceeds the fair value.

 

Fair value is typically estimated using an income approach based on the present value of future discounted cash flows. The significant estimates in the discounted cash flow model primarily include the discount rate, and rates of future revenue and expense growth and/or profitability of the acquired assets. In performing the impairment test, the Company considered, among other factors, the Company’s intention for future use of acquired assets, analyses of historical financial performance and estimates of future performance of Cocrystal’s product candidates.

 

F- 6

 

 

At June 30, 2020, the Company had goodwill of $19,092,000. The Company previously completed its annual impairment test in November 2019, and at that time determined the fair value of its reporting unit, under both the Company’s Nasdaq market capitalization and an income approach analysis; both methods were less than the carrying value as of December 31, 2019; therefore, management considered goodwill to be impaired. This resulted in a $46,103,000 impairment in 2019. The Company plans to conduct its next annual impairment test in November 2020.

 

Based on management’s assessment at June 30, 2020, no further impairment of Goodwill is required.

 

Long-Lived Assets

 

The Company regularly reviews the carrying value and estimated lives of its long-lived assets, including property and equipment, to determine whether indicators of impairment may exist which warrant adjustments to carrying values or estimated useful lives. The determinants used for this evaluation include management’s estimate of the asset’s ability to generate positive income from operations and positive cash flow in future periods as well as the strategic significance of the assets to the Company’s business objective. Should an impairment exist, the impairment loss would be measured based on the excess of the carrying amount over the asset’s fair value.

 

Research and Development Expenses

 

All research and development costs are expensed as incurred.

 

Revenue Recognition

 

The Company recognizes revenue from research and development arrangements. In accordance with Accounting Standards Codification (“ASC”) Topic 606–Revenue from Contracts with Customers (“Topic 606”), revenue is recognized when a customer obtains control of promised goods or services. The amount of revenue recognized reflects the consideration to which the Company expects to be entitled to receive in exchange for these goods and services.

 

In November 2018, the FASB issued ASU 2018-18, Collaborative Arrangements (Topic 808): Clarifying the Interaction between Topic 808 and Topic 606. This ASU provides guidance on whether certain transactions between collaborative arrangement participants should be accounted for as revenue under Topic 606 when the collaborative arrangement participant is a customer in the context of a unit of account. Accordingly, this amendment added unit of account guidance in Topic 606 when an entity is assessing whether the collaborative arrangement, or a part of the arrangement, is within the scope of Topic 606. In addition, the amendment provides certain guidance on presenting the collaborative arrangement transaction together with Topic 606.

 

On January 2, 2019, the Company entered into an Exclusive License and Research Collaboration Agreement (the “Collaboration Agreement”) with Merck to discover and develop certain proprietary influenza A/B antiviral agents. Under the terms of the Collaboration Agreement, Merck will fund research and development for the program, including clinical development, and will be responsible for worldwide commercialization of any products derived from the collaboration.

 

Revenue recorded for the three and six months ended June 30, 2020 was $554,000 and $1,015,000, respectively, compared with $592,000 and $5,670,000 for the three and six months ended June 30, 2019, respectively. As of June 30, 2020, accounts receivable of $592,000 was due from Merck.

 

Income Taxes

 

The Company accounts for income taxes under the asset and liability method. Under this method, deferred tax assets and liabilities are determined based on differences between financial reporting and tax bases of assets and liabilities and are measured using enacted tax rates and laws that are expected to be in effect when the differences are expected to be recovered or settled. Realization of deferred tax assets is dependent upon future taxable income. A valuation allowance is recognized if it is more likely than not that some portion or all of a deferred tax asset will not be realized based on the weight of available evidence, including expected future earnings. The Company recognizes an uncertain tax position in its financial statements when it concludes that a tax position is more likely than not to be sustained upon examination based solely on its technical merits. Only after a tax position passes the first step of recognition will measurement be required. Under the measurement step, the tax benefit is measured as the largest amount of benefit that is more likely than not to be realized upon effective settlement. This is determined on a cumulative probability basis. The full impact of any change in recognition or measurement is reflected in the period in which such change occurs. The Company elects to accrue any interest or penalties related to income taxes as part of its income tax expense.

 

F- 7

 

 

As of June 30, 2020, the Company assessed its income tax expense based on its projected future taxable income for the year ended December 31, 2020 and therefore recorded no amount for income tax expense for the six months ended June 30, 2020. In addition, the Company has significant deferred tax assets available to offset income tax expense due to net operating loss carry forwards which are currently subject to a full valuation allowance based on the Company’s assessment of future taxable income. Refer to our Annual Report on Form 10-K for the year ended December 31, 2019 for more information.

 

Stock-Based Compensation

 

The Company recognizes compensation expense using a fair value-based method for costs related to stock-based payments, including stock options. The fair value of options awarded to employees is measured on the date of grant using the Black-Scholes option pricing model and is recognized as expense over the requisite service period on a straight-line basis.

 

Use of the Black-Scholes option pricing model requires the input of subjective assumptions including expected volatility, expected term, and a risk-free interest rate. The Company estimates volatility using a blend of its own historical stock price volatility as well as that of market comparable entities since the Company’s common stock has limited trading history and limited observable volatility of its own. The expected term of the options is estimated by using the Securities and Exchange Commission Staff Bulletin No. 107’s Simplified Method for Estimate Expected Term. The risk-free interest rate is estimated using comparable published federal funds rates.

 

Share Issuance Costs

 

The Company accounts for direct and incremental costs related to the issuance of its capital stock as a reduction in the proceeds from such issuances.

 

Common Stock Purchase Warrants and Other Derivative Financial Instruments

 

We classify as equity any contracts that require physical settlement or net-share settlement or provide us a choice of net-cash settlement or settlement in our own shares (physical settlement or net-share settlement) provided that such contracts are indexed to our own stock as defined in ASC 815-40, Contracts in Entity’s Own Equity. We classify as assets or liabilities any contracts that require net-cash settlement (including a requirement to net cash settle the contract if an event occurs and if that event is outside our control) or give the counterparty a choice of net-cash settlement or settlement in shares (physical settlement or net-share settlement). We assess classification of our common stock purchase warrants and other freestanding derivatives at each reporting date to determine whether a change in classification between assets and liabilities is required.

 

Net Income (Loss) per Share

 

The Company accounts for and discloses net income (loss) per common share in accordance with FASB ASC Topic 260, Earnings Per Share. Basic income (loss) per common share is computed by dividing income (loss) attributable to common stockholders by the weighted average number of common shares outstanding. Diluted net income (loss) per common share is computed by dividing net income (loss) attributable to common stockholders by the weighted average number of common shares that would have been outstanding during the period assuming the issuance of common stock for all potential dilutive common shares outstanding. Potential common shares consist of shares issuable upon the exercise of stock options and warrants and the conversion of convertible notes payable.

 

The following table sets forth the computation of basic and diluted net income (loss) per common share (in thousands, except per share amounts) for the three months ended:

 

    June 30, 2020     June 30, 2019  
Numerator:                
Net income (loss) attributable to common stockholders   $ (5,485 )   $ 1,456  
Denominator:                
Weighted average number of shares outstanding, basic     46,930       30,986  
Adjustment for dilutive effects of warrants, outstanding and in-the-money     -       20  
Adjustment for dilutive effects of options, exercisable and in-the-money     -       -  
Weighted average number of common shares outstanding, diluted     46,930       31,006  
Net income (loss) per common share, basic   $ (0.12 )   $ 0.05  
Net income (loss) per common share, diluted   $ (0.12 )   $ 0.05  

 

F- 8

 

 

The following table sets forth the number of potential common shares excluded from the calculations of net loss per diluted share because their inclusion would be anti-dilutive (in thousands):

 

    June 30,  
    2020     2019  
Outstanding options to purchase common stock     1,801       988  
Warrants to purchase common stock     243       243  
Total     2,044       1,231  

 

Recent Accounting Pronouncements

 

In June 2016, the FASB issued ASU No. 2016-13, Credit Losses - Measurement of Credit Losses on Financial Instruments (“ASC 326”). The standard significantly changes how entities will measure credit losses for most financial assets, including accounts and notes receivables. The standard will replace today’s “incurred loss” approach with an “expected loss” model, under which companies will recognize allowances based on expected rather than incurred losses. Entities will apply the standard’s provisions as a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective. The standard is effective for interim and annual reporting periods beginning after December 15, 2019. The adoption of ASU 2016-13 is not expected to have a material impact on the Company’s financial position, results of operations, and cash flows.

 

Other recent authoritative guidance issued by the FASB (including technical corrections to the ASC), the American Institute of Certified Public Accountants, and the Securities and Exchange Commission (“SEC”) did not, or are not expected to, have a material impact on the Company’s consolidated financial statements and related disclosures.

 

3. Property and Equipment

 

Property and equipment are recorded at cost and depreciated over the estimated useful lives of the underlying assets (three to five years) using the straight-line method. As of June 30, 2020, and December 31, 2019, property and equipment consists of (in thousands):

 

    June 30, 2020     December 31, 2019  
Lab equipment   $ 1,478     $ 1,073  
Finance lease right-of-use lab equipment obtained in exchange for finance lease liabilities     118       347  
Computer and office equipment     120       92  
Total property and equipment     1,716       1,512  
Less: accumulated depreciation and amortization     (1,056 )     (1,081 )
Property and equipment, net   $ 660     $ 431  

 

Total depreciation and amortization expense was $36,000 and $68,000 for the three and six months ended June 30, 2020, which includes amortization expense of $15,000 and $32,000 related to finance lease right-of-use lab equipment, respectively. Total depreciation and amortization expense were $22,000 and $45,000 for the three and six months ended June 30, 2019, which includes amortization expense of $18,000 and $35,000 related to finance lease right-of-use lab equipment, respectively. For additional finance leases information, refer to Note 9 – Commitments and Contingencies.

 

4. Accounts Payable and Accrued Expenses

 

Accounts payable and accrued expenses consisted of the following (in thousands) as of:

 

    June 30, 2020     December 31, 2019  
Accounts payable   $ 832     $ 1,511  
Accrued compensation     160       83  
Accrued other expenses     1,648       405  
Total accounts payable and accrued expenses   $ 2,640     $ 1,999  

 

Accounts payable and accrued other expenses contain unpaid general and administrative expenses and costs related to research and development that have been billed and estimated unbilled, respectively, as of period-end.

 

F- 9

 

 

5. Common Stock

 

As of June 30, 2020, the Company has authorized 100,000,000 shares of common stock, $0.001 par value per share. The Company had 52,140,699 and 35,150,058 shares issued and outstanding as of June 30, 2020 and December 31, 2019, respectively.

 

The holders of common stock are entitled to one vote for each share of common stock held.

 

On January 29, 2020, the Company entered into a securities purchase agreement with certain institutional investors, pursuant to which the Company agreed to sell and issue, in a registered direct offering, 3,492,063 shares of common stock at a purchase price per share of $0.63 for aggregate net proceeds to the Company of approximately $1.5 million, after deducting fees payable to the placement agent and other estimated offering expenses payable by the Company. The Company closed the offering on January 31, 2020.

 

On February 27, 2020, the Company entered into a securities purchase agreement with certain institutional investors, pursuant to which the Company agreed to sell and issue, in a registered direct offering, 8,461,540 shares of common stock at a purchase price per share of $1.30 for aggregate net proceeds to the Company of approximately $10.1 million, after deducting fees payable to the placement agent and other estimated offering expenses payable by the Company. The Company closed the offering on February 28, 2020.

 

On March 9, 2020, the Company entered into a securities purchase agreement with certain institutional investors, pursuant to which the Company agreed to sell and issue, in a registered direct offering, 5,037,038 shares of common stock at a purchase price per share of $1.35 for aggregate net proceeds to the Company of approximately $5.0 million, after deducting fees payable to the placement agent, lock-up settlement fee and other estimated offering expenses payable by the Company. The Company closed the offering on March 10, 2020.

 

On June 2, 2020, the Company provided written notice to A.G.P./Alliance Global Partners (“AGP”) of its election to terminate the Amended and Restated Equity Distribution Agreement, dated October 30, 2019, by and between the Company and AGP, as amended on January 29, 2020 (the “AGP Agreement”). The termination of the AGP Agreement was effective June 3, 2020.

 

6. Stock Based Awards

 

Equity Incentive Plans

 

The Company adopted an equity incentive plan in 2007 (the “2007 Plan”) under which 1,786,635 shares of common stock had been reserved for issuance to employees and nonemployee directors and consultants of the Company. The Company no longer issues any awards under the 2007 Plan. Holders of outstanding incentive stock options granted under the 2007 Plan are eligible to purchase shares of the Company’s common stock at an exercise price equal to no less than the fair market value of such stock on the date of grant. The maximum term of options granted under the 2007 Plan was ten years.

 

The Company adopted a second equity incentive plan in 2015 (the “2015 Plan”) under which 2,705,237 (including 1,038,570 initially transferred from the 2007 Plan) shares of common stock have been reserved for issuance to employees, and nonemployee directors and consultants of the Company. Recipients of incentive stock options granted under the 2015 Plan shall be eligible to purchase shares of the Company’s common stock at an exercise price equal to no less than the estimated fair market value of such stock on the date of grant. The maximum term of options granted under the 2015 Plan is ten years. As of June 30, 2020, 2,718,020 options remain available for future grants under the 2015 Plan.

 

F- 10

 

 

The following table summarizes stock option transactions for the 2007 Plan and 2015 Plan, collectively, for the six months ended June 30, 2020 (in thousands, except per share amounts):

 

    Number of
Shares
Available
for Grant
    Total
Options
Outstanding
    Weighted
Average
Exercise
Price
    Aggregate
Intrinsic
Value
 
Balance at December 31, 2019     3,588       931     $ 4.14     $ -  
Exercised     -       -       -       -  
Granted     (878 )     878       1.33       167  
Cancelled     8       (8 )     2.94       -  
Balance at June 30, 2020     2,718       1,801       2.78       167  

 

The Company accounts for share-based awards to employees and nonemployee directors and consultants in accordance with the provisions of ASC 718, Compensation—Stock Compensation., and under the recently issued guidance following FASB’s pronouncement, ASU 2018-07, Compensation—Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting. Under ASC 718, and applicable updates adopted, share-based awards are valued at fair value on the date of grant and that fair value is recognized over the requisite service, or vesting, period. The Company values its equity awards using the Black-Scholes option pricing model, and accounts for forfeitures when they occur. For the three and six months ended June 30, 2020 and 2019, equity-based compensation expense recorded was $119,000 and $226,000, and $113,000 and $146,000, respectively.

 

During the six months ended June 30, 2020 the Company granted stock options to officers, directors, employees and consultants to purchase a total of 878,000 shares of common stock. The options have an exercise price of $1.33 per share, expire in ten years, and vest as follows: one half vests on the one year anniversary of the grant date and the remainder will vest in eight equal quarterly increments with the first such quarterly increment vesting on September 30, 2021. The total fair value of these options at the grant date was approximately $944,000 using the Black-Scholes Option pricing model.

 

The fair value of share option award is estimated using the Black-Scholes option pricing method based on the following weighted-average assumptions:

    Six Months Ended June 30,  
    2020     2019  
Risk-free interest rate     0.43 %     2.9 %
Average expected term (years)     5.9       6.1  
Expected volatility     107.45 %     90.0 %
Expected dividend yield     -       -  

 

The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of measurement corresponding with the expected term of the share option award; the expected term represents the weighted-average period of time that share option awards granted are expected to be outstanding giving consideration to vesting schedules and historical participant exercise behavior; the expected volatility is based upon historical volatility of the Company’s common stock; and the expected dividend yield is based on the fact that the Company has not paid dividends in the past and does not expect to pay dividends in the future.

 

As of June 30, 2020, there was approximately $1,898,000 of total unrecognized compensation expense related to non-vested stock options that is expected to be recognized over a weighted average period of 8.7 years. For options granted and outstanding, there were 464,627 options outstanding which were fully vested or expected to vest, with an aggregate intrinsic value of $0, a weighted average exercise price of $5.51, and weighted average remaining contractual term of 6.9 years at June 30, 2020. For vested and exercisable options, outstanding shares totaled 464,627, with an aggregate intrinsic value of $0. These options had a weighted average exercise price of $5.51 per share and a weighted-average remaining contractual term of 6.9 years at June 30, 2020.

 

The aggregate intrinsic value of outstanding and exercisable options at June 30, 2020 was calculated based on the closing price of the Company’s common stock as reported on The Nasdaq Capital Market on June 30, 2020 of $1.52 per share less the exercise price of the options. The aggregate intrinsic value is calculated based on the positive difference between the closing fair market value of the Company’s common stock and the exercise price of the underlying options.

 

Common Stock Reserved for Future Issuance

 

The following table presents information concerning common stock available for future issuance (in thousands) as of:

 

    June 30, 2020     June 30, 2019  
Stock options issued and outstanding     1,801       989  
Shares authorized for future option grants     2,718       3,530  
Warrants outstanding     243       243  
Total     4,762       4,762  

 

F- 11

 

 

7. Warrants

 

The following is a summary of activity in the number of warrants outstanding to purchase the Company’s common stock for the six months ended June 30, 2020 (in thousands):

 

   

Warrants

Accounted for as:

Equity

    Warrants Accounted for as: Liabilities        
    May 2018
Warrants
    October 2013 Warrants     January 2014 Warrants     Total  
Outstanding, December 31, 2019     84       26       133       243  
Exercised     -       -       -       -  
Granted     -       -       -       -  
Expired     -       -       -       -  
Outstanding, June 30, 2020     84       26       133       243  
Expiration date:     October 27, 2022       October 24, 2023       January 16, 2024          

 

The following is a summary of activity in the number of warrants outstanding to purchase the Company’s common stock for the six months ended June 30, 2019 (in thousands):

 

   

Warrants

Accounted for as:

Equity

   

Warrants Accounted for as: Liabilities

       
    May 2018
Warrants
    October 2013 Warrants     January 2014 Warrants     Total  
Outstanding, December 31, 2018     84       26       133       243  
Exercised     -       -       -       -  
Granted     -       -       -       -  
Expired     -       -       -       -  
Outstanding, June 30, 2019     84       26       133       243  
Expiration date:     October 27, 2022       October 24, 2023       January 16, 2024          

 

Warrants Classified as Liabilities

 

Liability-classified warrants consist of warrants issued by Biozone in connection with equity financings in October 2013 and January 2014, which were assumed by the Company in connection with its merger with Biozone in January 2014. Warrants accounted for as liabilities have the potential to be settled in cash or are not indexed to the Company’s own stock.

 

The estimated fair value of outstanding warrants accounted for as liabilities is determined at each balance sheet date. Any decrease or increase in the estimated fair value of the warrant liability since the most recent balance sheet date is recorded in the condensed consolidated statement of operations as changes in fair value of derivative liabilities.

 

The fair value of the warrants classified as liabilities is estimated using the Black-Scholes option-pricing model with the following inputs as of June 30, 2020:

 

    October 2013
Warrants
    January 2014
Warrants
 
             
Strike price   $ 15.00     $ 15.00  
Expected dividend yield     0.00 %     0.00 %
Contractual term (years)     3.3       3.5  
Cumulative volatility     113.56 %     110.85 %
Risk-free rate     0.23 %     0.24 %
Value   $ 0.48     $ 0.49  

 

The fair value of the warrants classified as liabilities is estimated using the Black-Scholes option-pricing model with the following inputs as of December 31, 2019:

 

    October 2013
Warrants
    January 2014
Warrants
 
             
Strike price   $ 15.00     $ 15.00  
Expected dividend yield     0.00 %     0.00 %
Contractual term (years)     3.8       4.0  
Cumulative volatility     89.59 %     90.58 %
Risk-free rate     1.67 %     1.68 %
Value   $ 0.04     $ 0.05  

 

The Company estimates volatility using a blend of its own historical stock price volatility as well as that of market comparable entities since the Company’s common stock has limited trading history and limited observable volatility of its own. The expected life assumption is based on the remaining contractual terms of the warrants. The risk-free rate is based on the zero coupon rates in effect at the balance sheet date. The dividend yield used in the pricing model is zero, because the Company has no present intention to pay cash dividends.

 

8. Licenses and Collaborations

 

Merck

 

On January 2, 2019, the Company entered into an Exclusive License and Research Collaboration Agreement (the “Collaboration Agreement”) with Merck to discover and develop certain proprietary influenza A/B antiviral agents. Under the terms of the Collaboration Agreement, Merck funds research and development for the program, including clinical development, and will be responsible for worldwide commercialization of any products derived from the collaboration. Cocrystal received an upfront payment of $4,000,000 in 2019 and is eligible to receive payments related to designated development, regulatory and sales milestones with the potential to earn up to $156,000,000, as well as royalties on product sales. Merck can terminate the Collaboration Agreement at any time prior to the first commercial sale of the first product developed under the Collaboration Agreement, in its sole discretion, without cause.

 

The Company recognized $1,015,000 in revenues on the condensed consolidated statement of operations for the six months ended June 30, 2020 related to influenza A/B program research and development expenses for the first six months of 2020.

 

F- 12
 

  

Kansas State University Research Foundation

 

Cocrystal entered into a License Agreement with Kansas State University Research Foundation (“KSURF”) on February 18, 2020 to further develop certain proprietary broad-spectrum antiviral compounds for the treatment of Norovirus and Coronavirus infections.

 

Pursuant to the terms of the License Agreement, KSURF granted the Company an exclusive royalty bearing license to practice under certain patent rights, under patent applications covering antivirals against coronaviruses, caliciviruses, and picornaviruses, and related know-how, including to make and sell therapeutic, diagnostic and prophylactic products.

 

The Company agreed to pay KSURF a one-time non-refundable license initiation fee of $80,000 under the License Agreement, and annual license maintenance fees. The Company also agreed to make certain future milestone payments, dependent upon the progress of clinical trials, regulatory approvals, and initiation of commercial sales in the United States and certain countries outside the United States. See Note 11, Subsequent Events with respect to another License Agreement with KSURF.

 

On April 19, 2020, the Company entered into a second License Agreement with KSURF in addition to the License Agreement entered into in February 2020.

 

Pursuant to the terms of the second License Agreement, KSURF granted the Company an exclusive royalty bearing license to practice under certain patent rights under patent applications covering antivirals against coronaviruses, caliciviruses, and picornaviruses, and related know-how, including to make and sell therapeutic, diagnostic and prophylactic products.

 

The Company agreed to pay KSURF a one-time non-refundable license initiation fee and annual license maintenance fees. The Company also agreed to make certain future milestone payments, dependent upon the progress of clinical trials, regulatory approvals, and initiation of commercial sales in the United States and certain countries outside the United States.

 

9. Commitments and Contingencies

 

Commitments

 

In the ordinary course of business, the Company enters into non-cancelable leases to purchase equipment and for its facilities, including related party leases (see Note 10 – Transactions with Related Parties). Leases are accounted for as operating leases or finance leases, in accordance with ASC 842, Leases.

 

Operating Leases

 

The Company leases office space in Miami, Florida and laboratory space in Bothell, Washington under operating leases that expire on August 31, 2021 and January 31, 2024, respectively. The Company recently signed an amendment to the Bothell, Washington lease agreement by extending the lease term for a period of sixty months from February 2019 through January 2024. For operating leases, the weighted average discount rate is 8.0% and the weighted average remaining lease term is 3.3 years.

 

The following table summarizes the Company’s maturities of operating lease liabilities, by year and in aggregate, as of June 30, 2020 (in thousands):

 

2020 (excluding the six months ended June 30, 2020)   $ 114  
2021     213  
2022     178  
2023     183  
Thereafter     15  
Total operating lease payments     703  
Less: present value discount     (88 )
         
Total operating lease liabilities   $ 613  

 

The operating lease liabilities summarized above do not include variable common area maintenance (CAM) charges, which are contractual liabilities under the Company’s Bothell, Washington lease. CAM charges for the Bothell, Washington facility are calculated annually based on actual common expenses for the building incurred by the lessor and proportionately billed to tenants based on leased square footage. For the six months ended June 30, 2020 and 2019, approximately $41,000 of variable lease expense (CAM) was included in general and administrative operating expenses on the condensed consolidated statements of operations.

 

The minimum lease payments above include the amounts that would be paid if the Company maintains its Bothell lease for the five-year term, starting February 2019. The Company has the right to terminate this lease after three years on January 31, 2022, by giving prior notice at least nine months before the early termination date and by paying a termination fee equal to the sum of unamortized leasing commissions and reimbursement for tenant improvements provided by the landlord amortized at 8.0% over the extended term.

 

On September 1, 2018, the Company entered into a lease agreement with a limited liability company controlled by Dr. Phillip Frost, a director and a principal shareholder of the Company (see Note 10 – Transactions with Related Parties). The lease term is three years with an optional three-year extension. On an annualized basis, straight-line rent expense is approximately $58,000, including fixed and estimable fees and taxes. As of June 20, 2020, operating lease rights include $64,000 and operating lease liabilities include $99,000 relating to this lease.

 

F- 13
 

 

For the six months ended June 30, 2020 and 2019, operating lease expense, excluding short-term leases, finance leases and CAM charges, totaled approximately $149,000 and $100,000, respectively, of which $29,000 in each period was to a related party.

 

Finance Leases

 

In November 2018, the Company entered into two lease agreements to acquire lab equipment with 18 monthly payments of $18,000 payable through May 27, 2020 and 36 monthly payments of $1,000 payable through November 21, 2021, respectively; in June 2020 the Company entered into a new lease agreement to acquire lab equipment with 36 payments of $2,000 monthly payable through April 16, 2023. For finance leases, the weighted average discount rate is 8.0% and the weighted average remaining lease term is 4.2 years.

 

The following table summarizes the Company’s maturities of finance lease liabilities, by year and in aggregate, as of June 30, 2020 (in thousands):

 

2020 (excluding the six months ended June 30, 2020)   $ 22  
2021     44  
2022     29  
2023     7  
Total finance lease payments     102  
Less: present value discount     (9 )
Total finance lease liabilities   $ 93  

 

The leased lab equipment is depreciable over five years and is presented net of accumulated depreciation on the condensed consolidated balance sheets under property and equipment. As of June 30, 2020, total right-of-use lab equipment and accumulated depreciation recognized under finance leases is $120,000 and $16,000, respectively, and depreciation expense for the three months ended June 30, 2020 was $15,000. As of December 31, 2019, total right-of-use assets lab equipment exchanged for finance lease liabilities was $347,000 and accumulated depreciation for lab equipment under finance leases was $75,000.

 

At June 30, 2020, the aggregate outstanding balance of finance lease liabilities, current and long-term, is $93,000 and the Company expects to pay future interest charges of $10,000 over the remaining finance lease terms. At December 31, 2019, the aggregate outstanding balance of finance lease liabilities, current and long-term, was $117,000 and the Company expects to pay future interest charges of $4,000 over the remaining finance lease terms. For the six months ended June 30, 2020, the Company paid $101,000 and $4,000 in principal and interest, respectively, totaling financing cash out flows of $105,000, net of interest expense, for amount included in the measurement of lease liabilities for finance leases. For the six months ended June 30, 2019, the Company paid $105,000 and $11,000 in principal and interest, respectively, totaling financing cash out flows of $116,000 for amounts included in the measurement of lease liabilities for finance leases and added back to net income the $11,000 of interest expense under cash flows from operating activities.

 

Contingencies

 

From time to time, the Company is a party to, or otherwise involved in, legal proceedings arising in the normal course of business. As of the date of this report, except as described below, the Company is not aware of any proceedings, threatened or pending, against it which, if determined adversely, would have a material effect on its business, results of operations, cash flows or financial position.

 

On September 20, 2018, Anthony Pepe, individually and on behalf of a class, filed with the United States District Court for the District of New Jersey a complaint against the Company, certain current and former executive officers and directors of the Company and the other defendants named therein for violation of Section 10(b) of the Exchange Act and Rule 10b-5 promulgated thereunder. The class consists of the persons and entities who purchased the Company’s common stock during the period from September 23, 2013 through September 7, 2018. Pepe also alleges violation of other sections of the Exchange Act by the defendants named in the complaint other than the Company. Pepe seeks damages, pre-judgment and post-judgment interest, reasonable attorneys’ fees, expert fees and other costs.

 

On January 16, 2019, Ms. Susan Church, a stockholder of the Company, filed with the United States District Court for the Western District of Washington a derivative suit against certain current and former executive officers and directors of the Company alleging breach of fiduciary duties, unjust enrichment, waste of corporate assets, and violations of the rules governing proxy solicitation. Church seeks, among other things, money damages, disgorgement of profits from alleged wrongful conduct, including cash bonuses, pre-judgment and post-judgment interest, reasonable attorneys’ fees, expert fees and other costs.

 

In June 2020, the Company negotiated and executed term sheets with respect to the proposed settlement of the class action and the derivative lawsuit discussed above. The term sheets are subject to approval by the court. As of June 30, 2020, the Company agreed to pay $450,000 for its share of the total proposed class action settlement and as for the derivative lawsuit agreed to make certain corporate governance changes.

 

Liberty Insurance Underwriters Inc. filed suit against us in federal court in Delaware seeking a declaratory judgment that it is not liable to defend us in the class and derivative litigation. The insurance company also is claiming it is entitled to recover $1 million it advanced to us in connection with a prior SEC investigation, of which the Company disagrees with the insurance company position. We have retained counsel to defend us which has filed an answer to the complaint.

 

F- 14
 

  

In November 2017, Lee Pederson, a former Biozone lawyer, filed a lawsuit in Minnesota against co-defendants the Company, Dr. Phillip Frost, OPKO Health, Inc. and Brian Keller for various allegations. On September 13, 2018, the United States District Court granted the Company and its co-defendants’ motion to dismiss Pederson’s amended complaint. On October 11, 2018, Pederson filed a notice of appeal with the United States Court of Appeals for the Eighth Circuit. The plaintiff’s appeal was denied and the dismissal affirmed. In July 2019, Lee Pederson filed another lawsuit in Minnesota against co-defendants the Company, Dr. Frost, and Daniel Fisher for various allegations. That lawsuit had previously been stayed by the court, pending disposition of Pederson’s first lawsuit. With that first lawsuit having been disposed of and the second lawsuit thus no longer stayed, the Company was served in July 2020 with the complaint initiating that second lawsuit and is reviewing the complaint with counsel.

 

On May 19, 2020, A.G.P./Alliance Global Partners (“AGP”), which had previously acted as the Company’s underwriter, placement agent and sales agent in connection with the Company’s registered and exempt equity offerings, filed a lawsuit against the Company in the United States District Court for the Southern District of New York alleging violation of a lock-up provision under the Placement Agent Agreement, dated January 28, 2020 (the “Placement Agent Agreement”), by and between the Company and AGP. AGP seeks (i) damages estimated in the complaint to be in excess of $1 million and attorneys’ fees, and (ii) declaratory relief. The Company has filed a motion to dismiss the complaint.

 

While the Company intends to defend itself vigorously from the claims in the aforementioned disputes, it is unable to predict the outcome of these legal proceedings. Any potential loss as a result of these legal proceedings cannot be reasonably estimated. As a result, the Company has not recorded a loss contingency for any of the aforementioned claims.

 

COVID-19

 

Our administrative and finance activities are fully functional out of our Miami, Florida location and our research laboratory in Bothell, Washington remains open for essential operations while meeting COVID-19 quarantine challenges. Our scientists are also able to continue working on site and remotely and we remain committed to meeting our corporate and development milestones throughout the year. We have experienced delays in our supply chain and with service partners as a result of the COVID-19 pandemic. Also because of the unknown impact from the COVID-19 pandemic, it may have unanticipated material adverse effects on us in a number of ways including:

 

  If our scientists and other personnel (or their family members) are infected with the virus, it may hamper our ability to engage in ongoing research activities;
  Similarly, we rely on third parties who can be similarly impacted;
  If these third parties are affected by COVID-19, they may focus on other activities which they may devote their limited time to other priorities rather than to our joint research;
  We may experience a shortage of laboratory materials which would impact our research activities;
  As a result of the continuing impact of the virus, we may fail to get access to third party laboratories which would impact our research activities; and
  We may sustain problems due to the serious short-term and possible longer term serious economic disruptions as our economy faces unprecedented uncertainty.

 

10. Transactions with Related Parties

 

In September 2018, the Company leased administrative offices from a limited liability company owned by one of the Company’s directors and principal shareholder, Dr. Phillip Frost. The operating lease term is three years with an optional three-year extension. On an annualized basis, straight-line lease expense, including taxes and fees, for this location is approximately $58,000. In September 2018, the Company paid a lease deposit of $4,000 and total amounts paid in connection with this operating lease were $34,000 and $28,000 for the six months ended June 30, 2020 and 2019, respectively.

 

11. Subsequent Events

 

Entry into a Material Definitive Agreement

 

On July 1, 2020 Company entered into an At-The-Market Offering Agreement with H.C. Wainwright & Co., LLC (“Wainwright”), pursuant to which the Company may issue and sell over time and from time to time, to or through Wainwright, up to $10,000,000 of shares of the Company’s common stock.

 

F- 15
 

  

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

Overview

 

Cocrystal Pharma, Inc. (the “Company” or “Cocrystal”) is a clinical stage biotechnology company seeking to discover and develop novel antiviral therapeutics as treatments for serious and/or chronic viral diseases. We employ unique structure-based technologies and Nobel Prize winning expertise to create first- and best-in-class antiviral drugs. These technologies are designed to efficiently deliver small molecule therapeutics that are safe, effective and convenient to administer. We have identified promising preclinical and early clinical stage antiviral compounds for unmet medical needs including Influenza Virus, Coronavirus, Hepatitis C virus (“HCV”), and Norovirus infections.

 

Impact of COVID-19 Pandemic

 

A novel strain of coronavirus which causes COVID-19 continues to spread and severely impact the economy of the United States and other countries around the world. We are committed to being a part of the coordinated public and private sector response to this unprecedented challenge.

 

We have put preparedness plans in place at our facilities to maintain continuity of operations, while also taking steps to keep visitors and employees healthy and safe. In line with recommendations to reduce large gatherings and increase social distancing, we have, where practical, transitioned many office-based colleagues to a remote work environment.

 

The consequences of the COVID-19 pandemic and the impact on the national and global economy continues to evolve and the full extent of the impact is uncertain as of the date of this filing.

 

Research and Development Update

 

During the six months ended June 30, 2020, the Company focused its research and development efforts primarily in four areas:

 

Influenza

 

On January 2, 2019, we entered into an Exclusive License and Research Collaboration Agreement (the “Collaboration Agreement”) with Merck Sharp & Dohme Corp. (“Merck”) to discover and develop certain proprietary influenza A/B antiviral agents.

 

Under the terms of the Collaboration Agreement, Merck is funding research and development for the program at Cocrystal and Merck, including clinical development at Merck, and Merck is responsible for worldwide commercialization of any products derived from the collaboration. The Company received an upfront payment of $4,000,000 and is eligible to receive milestone payments related to designated development, regulatory and sales milestones with the potential to earn up to $156,000,000, as well as royalties on product sales. The Collaboration Agreement operates under a Research Operating Plan (ROP) which includes goals for both organizations. The Company achieved its anticipated goals in 2019 and H1 2020.

 

We have several preclinical candidates under development for the treatment of influenza infection. CC-42344, a novel PB2 inhibitor, has been selected as a preclinical lead. This candidate binds to a highly conserved PB2 site of influenza polymerase complex (PB1: PB2: PA) and exhibits a novel mechanism of action. CC-42344 showed excellent preclinical antiviral activity against influenza A strains, including avian pandemic strains and oseltamivir-resistant strains, and has a favorable pharmacokinetic profile. We are currently conducting additional preclinical IND enabling activities and plan to initiate a Phase 1 study during 2021.

 

Coronavirus

 

During the six months ended June 30, 2020, the Company initiated a coronavirus program targeting the SARS-CoV-2 virus that is responsible for the COVID-19 pandemic. There is currently no specific vaccine or antiviral treatment available for COVID-19, although there are certain drugs that may offer relief and the federal government has funded ongoing vaccine research. Remdesivir is currently used for the treatment of hospitalized patients with severe COVID-19 symptoms pursuant to an emergency use authorization granted by the U.S. Food and Drug Administration (“FDA”).

 

The Company is currently advancing its Coronavirus program leveraging the rights to preclinical leads from its License Agreements with KSURF to further develop certain proprietary broad-spectrum antiviral compounds for the treatment of coronavirus infections (COVID-19). Cocrystal intends to pursue research and development of these antiviral compounds for coronavirus, including preclinical and clinical development. The Company’s recent additional License Agreement from KSURF significantly expands and further advances its COVID-19 program by providing additional novel anti-coronavirus compounds for further development.

 

We initiated preclinical studies in our COVID-19 program during the second quarter and plan to identify additional replication inhibitors utilizing our proprietary platform technology during the third quarter of this year. The Company anticipates the selection of its lead preclinical molecule in the fourth quarter of 2020.

 

  3  
 

  

Hepatitis C

 

CC-31244, our HCV Non-Nucleoside Polymerase Inhibitor (“NNI”), is a potential best-in-class pan-genotypic inhibitor of NS5B polymerase for the treatment of HCV infection. It has the potential to be an important component in an all-oral ultra-short HCV combination therapy. The Company filed an Investigational New Drug (“IND”) application with the FDA on February 28, 2018 and received notice from the FDA on March 29, 2018 that its IND was now open and the Company was cleared to initiate its Phase 2a clinical study evaluating CC-31244 for the treatment of HCV infected individuals.

 

In June 2018, the Company began enrollment in and initiation of patient dosing in its Phase 2a clinical study evaluating CC-31244 for the treatment of HCV infected individuals and completed the enrollment in September 2018. The Phase 2a open-label study was designed to evaluate the safety, tolerability and preliminary efficacy of CC-31244 in combination with Epclusa, an approved twelve-week HCV drug. Patients were treated with CC-31244 and Epclusa for two weeks and then Epclusa alone for an additional four weeks for a total of six weeks.

 

On January 22, 2019 the Company announced safety and preliminary efficacy data for the Phase 2a study. All subjects had completed the six-week treatment regimen. The treatment was well tolerated with no study discontinuations due to adverse events. Eight of 12 subjects achieved the primary efficacy endpoint of sustained virologic response at 12 weeks after completion of treatment (SVR12). SVR12 is defined as undetectable virus in blood 12 weeks after completion of treatment and is considered a virologic cure. The eight subjects that achieved SVR12 had significantly higher frequencies of terminally differentiated effector memory CD8+ T cells compared with the four that relapsed at both baseline and at end-of-6-week treatment. The trial and the final study report have been completed.

 

In October 2018, the Company signed a Clinical Trial Agreement for an investigator-initiated study with the Humanity & Health Research Centre (“HHRC”) in Hong Kong, China. Due to unrest in Hong Kong and the coronavirus pandemic, the clinical trial agreement has been terminated effective March 24, 2020.

 

The Company is in partnership discussions for further clinical development of CC-31244. There can be no assurances that any discussions will result in a partnership.

 

Norovirus Infections

 

We continue to identify and develop inhibitors of replication using the Company’s proprietary structure-based drug design technology platform. Cocrystal recently entered into License Agreements with the KSURF to further develop certain proprietary broad-spectrum antiviral compounds for humans to treat Norovirus and Coronavirus infections. Preclinical activities for our Norovirus program are currently under way. The Company expects to complete its proof-of-concept animal model study in the fourth quarter of 2020.

 

Results of Operations for the Three and Six Months Ended June 30, 2020 compared to the Three and Six Months Ended June 30, 2019

 

Revenue

 

Revenue recorded for the three and six months ended June 30, 2020 was $554,000 and $1,015,000, respectively, compared with $592,000 and $5,670,000 for the three and six months ended June 30, 2019, respectively. The revenue for the six months ended June 30, 2019 included $4,368,000 as consideration in exchange for conveyance of intellectual property rights at the signing of the Merck Collaboration Agreement executed on January 2, 2019. Currently, reimbursement of research and development expenses under the Collaboration Agreement is our only source of revenue.

 

  4  
 

 

Research and Development Expense

 

Research and development expense consist primarily of compensation-related costs for our employees dedicated to research and development activities and for our Scientific Advisory Board members, as well as lab supplies, lab services, and facilities and equipment costs related to our research and development programs. During the first quarter of 2020, we initiated a Coronavirus program targeting the SARS-CoV-2 virus that is responsible for the COVID-19 pandemic. There is currently no approved specific vaccine or antiviral treatment available for COVID-19.

 

Total research and development expenses for the three and six months ended June 30, 2020 was $1,976,000 and $3,259,000, respectively, compared with $1,091,000 and $1,969,000 for the three and six months ended June 30, 2019, respectively. The increase for the three and six months ended June 30, 2020 compared to the three months ended June 30, 2019 was primarily due to increases in COVID-19 and Influenza programs.

 

General and Administrative Expense

 

General and administrative expense includes compensation-related costs for our employees dedicated to general and administrative activities, legal fees, audit and tax fees, consultants and professional services, and general corporate expenses.

 

General and administrative expenses for the three and six months ended June 30, 2020 was $2,028,000 and $3,167,000, respectively, compared with $1,051,000 and $2,374,000 for the three and six months ended June 30, 2019, respectively. The increase for the three and six months ended June 30, 2020 compared to the three months ended June 30, 2019 was primarily due to litigation costs, insurance increases and executive compensation.

 

Interest Expense, Net

 

Interest expense for the three and six months ended June 30, 2020 was $2,000 and $4,000, respectively, compared with $5,000 and $11,000 for the three and six months ended June 30, 2019, respectively. The increase for the three and six months ended June 30, 2020 compared to the three months ended June 30, 2019. The interest amounts represent interest incurred on finance leased lab equipment in 2019.

 

Other Income/(Expense)

 

In accordance with U.S. GAAP, we record other income or expense based upon the computed change in fair value of our outstanding warrants that are accounted for as liabilities. The fair value of our outstanding warrants is inversely related to the fair value of the underlying common stock; as such, an increase in the price of our common stock during a given period generally results in other expense. Conversely, a decrease in the price of our common stock generally results in other income, which is what occurred during both periods. The change in the fair value of derivative liabilities for the six months ended June 30, 2020 and 2019 was ($70,000) and $140,000, respectively.

 

Net Income (Loss)

 

Net loss for the three and six months ended June 30, 2020 was $3,495,000 and $5,485,000, respectively, compared with a net loss of $1,515,000 and a net income of $1,456,000 for the three and six months ended June 30, 2019, respectively, as a result of revenue and expenses described above.

 

Liquidity and Capital Resources

 

Net cash used in operating activities was $4,388,000 for the six months ended June 30, 2020 compared with net cash provided by operating activities of $990,000 for the same period in 2019. This was primarily due to the $4,000,000 upfront payment from Merck at the signing of the Collaboration Agreement in January 2019.

 

Net cash used for investing activities was approximately $220,000 for the six months ended June 30, 2020 compared with $29,000 net cash used in the same period in 2019. For the six months ended June 30, 2020 and 2019, net cash used for investing activities consisted primarily of capital spending for computers and lab equipment.

 

Net cash provided by financing activities totaled $16,505,000 for the six months ended June 30, 2020 compared with $3,811,000 for the same period in 2019. This was primarily due to the sale of common stock in three registered direct offerings during the six months ended June 30, 2020.

 

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The Company has not yet established an ongoing source of revenue sufficient to cover its operating costs. The Company had $19,365,000 cash on June 30, 2020 and believes this is sufficient to maintain planned operations through 2021.

 

We have focused our efforts on research and development activities, including through collaborations with suitable partners. We have been profitable on a quarterly basis, but have never been profitable on an annual basis. We have no products approved for sale and have incurred operating losses and negative operating cash flows on an annual basis since inception.

 

The Company’s interim consolidated financial statements are prepared using generally accepted accounting principles in the United States of America applicable to a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.

 

Historically, public and private equity offerings have been our principal source of liquidity. During the six months ended June 30, 2020, the Company closed the following three registered direct offerings of its Common Stock.

 

On January 29, 2020, the Company entered into a Placement Agency Agreement with AGP, pursuant to which AGP agreed to serve as the placement agent in connection with the registered offering of 3,492,063 shares of Common Stock at a public offering price of $0.63 per share for aggregate gross proceeds to the Company of approximately $2.2 million, before deducting fees payable to the placement agent and other estimated offering expenses payable by the Company. In connection with the offering, the Company also entered into Securities Purchase Agreements with certain investors named therein, pursuant to which the Company agreed to issue the Shares directly to investors. The Company closed the offering on January 31, 2020.

 

On February 27, 2020, the Company entered into a securities purchase agreement with certain institutional investors, pursuant to which the Company agreed to sell and issue, in a registered direct offering, 8,461,540 shares of Common Stock at a purchase price per share of $1.30 for aggregate gross proceeds to the Company of approximately $11.0 million, before deducting fees payable to the placement agent and other estimated offering expenses payable by the Company. The Company closed the offering on February 28, 2020.

 

On March 9, 2020, the Company entered into a securities purchase agreement with certain institutional investors, pursuant to which the Company agreed to sell and issue, in a registered direct offering, 5,037,038 shares of Common Stock at a purchase price per share of $1.35 for aggregate gross proceeds to the Company of approximately $6.8 million, before deducting fees payable to the placement agent and other estimated offering expenses payable by the Company. The Company closed the offering on March 10, 2020.

 

Subsequently, on July 1, 2020 Company entered into an At-The-Market Offering Agreement (“ATM Agreement”) with H.C. Wainwright & Co., LLC (“Wainwright”), pursuant to which the Company may issue and sell over time and from time to time, to or through Wainwright, up to $10,000,000 of shares of the Company’s common stock. The Company has not sold any shares pursuant to this ATM as of the date of this filing.

 

As the Company continues to incur losses, achieving profitability is dependent upon the successful development, approval and commercialization of its product candidates, and achieving a level of revenues adequate to support the Company’s cost structure. The Company may never achieve profitability, and unless and until it does, the Company will continue to need to raise additional capital. Management intends to fund future operations through additional private or public equity offerings and through arrangements with strategic partners or from other sources. There can be no assurances, however, that additional funding will be available on terms acceptable to the Company, or at all, and any equity financing may be very dilutive to existing shareholders.

 

Cautionary Note Regarding Forward-Looking Statements

 

This report includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements regarding the potential earnings under the Collaboration Agreement; the expected progress of, and the anticipated timing of achieving the value-driving milestones in, our Influenza program, including the initiation of the Phase 1 study in 2021; the expected progress of, and the anticipated timing of achieving the value-driving milestones in, our coronavirus program, including identifying additional replication inhibitors using our proprietary platform technology in Q3 2020 and the selection of a preclinical lead molecule in Q4 2020; the expected progress of, and the anticipated timing of achieving the value-driving milestones in, our norovirus program, including completing the proof-of-concept animal model study in the fourth quarter of 2020; and future liquidity. The words “believe,” “may,” “estimate,” “continue,” “anticipate,” “intend,” “should,” “plan,” “could,” “target,” “potential,” “is likely,” “will,” “expect” and similar expressions, as they relate to us, are intended to identify forward-looking statements. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy and financial needs.

 

  6  
 

 

The results anticipated by any or all of these forward-looking statements might not occur. Important factors that could cause actual results to differ from those in the forward-looking statements include the risks arising from the impact of the COVID-19 pandemic on our Company, including its future effect on the U.S. and global economies, supply chain disruptions, our continued ability to proceed with our programs, receive necessary regulatory approvals and continue to rely on certain third parties, risks arising from our reliance on continuing collaboration with Merck under the Collaboration Agreement, the future results of preclinical and clinical studies, general risks arising from clinical trials, receipt of regulatory approvals, development of effective treatments and/or vaccines by competitors, and our ability to find and enter into agreements with suitable collaboration partners. Further information on our risk factors is contained in our filings with the SEC, including our Annual Report on Form 10-K for the year ended December 31, 2019. We undertake no obligation to publicly update or revise any forward-looking statements, whether as the result of new information, future events or otherwise.

 

Critical Accounting Policies and Estimates

 

In our Annual Report on Form 10-K for the year ended December 31, 2019, we disclosed our critical accounting policies and estimates upon which our financial statements are derived.

 

Accounting estimates. The preparation of financial statements in conformity with accounting principles generally accepted in the U.S. requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ significantly from these estimates

 

Goodwill. As of June 30, 2020, the Company had a goodwill of $19,092,000. Goodwill is tested at least annually for impairment or when events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable, by assessing qualitative factors or performing a quantitative analysis in determining whether it is more. The Company’s last annual impairment assessment was on November 30, 2019.

 

Revenue recognition. Effective in the fourth quarter of 2018, we adopted Accounting Standards Codification (“ASC”) Topic 606–Revenue from Contracts with Customers.

 

Readers are encouraged to review these disclosures in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019 in conjunction with the review of this report.

 

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

Not applicable.

 

ITEM 4. CONTROLS AND PROCEDURES

 

Evaluation of Disclosure Controls and Procedures

 

We carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934 (the “Exchange Act”) as of the end of the period covered by this report. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures as of June 30, 2020 were effective to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms.

 

Changes in Internal Control over Financial Reporting

 

There were no material changes in our internal controls over financial reporting or in other factors that could materially affect, or are reasonably likely to affect, our internal controls over financial reporting during the quarter ended June 30, 2020. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

 

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PART II — OTHER INFORMATION

 

ITEM 1. LEGAL PROCEEDINGS

 

From time to time, the Company is a party to, or otherwise involved in, legal proceedings arising in the normal course of business. During the reporting period, except as set forth below, there have been no material changes to the description of legal proceedings set forth in our Annual Report on Form 10-K for the year ended December 31, 2019.

 

On September 20, 2018, Anthony Pepe, individually and on behalf of a class, filed with the United States District Court for the District of New Jersey a complaint against the Company, certain current and former executive officers and directors of the Company and the other defendants named therein for violation of Section 10(b) of the Exchange Act and Rule 10b-5 promulgated thereunder. The class consists of the persons and entities who purchased the Company’s common stock during the period from September 23, 2013 through September 7, 2018. Pepe also alleges violation of other sections of the Exchange Act by the defendants named in the complaint other than the Company. Pepe seeks damages, pre-judgment and post-judgment interest, reasonable attorneys’ fees, expert fees and other costs.

 

On January 16, 2019, Ms. Susan Church, a stockholder of the Company, filed with the United States District Court for the Western District of Washington a derivative suit against certain current and former executive officers and directors of the Company alleging breach of fiduciary duties, unjust enrichment, waste of corporate assets, and violations of the rules governing proxy solicitation. Church seeks, among other things, money damages, disgorgement of profits from alleged wrongful conduct, including cash bonuses, pre-judgment and post-judgment interest, reasonable attorneys’ fees, expert fees and other costs.

 

In June 2020, the Company negotiated and executed term sheets with respect to the proposed settlement of the class action and the derivative lawsuit discussed above. The term sheets are subject to approval by the court. As of June 30, 2020, the Company agreed to pay $450,000 for its share of the total proposed class action settlement and as for the derivative lawsuit agreed to make certain corporate governance changes.

 

In November 2017, Lee Pederson, a former Biozone lawyer, filed a lawsuit in Minnesota against co-defendants the Company, Dr. Phillip Frost, OPKO Health, Inc. and Brian Keller for various allegations. On September 13, 2018, the United States District Court granted the Company and its co-defendants’ motion to dismiss Pederson’s amended complaint. On October 11, 2018, Pederson filed a notice of appeal with the United States Court of Appeals for the Eighth Circuit. The plaintiff’s appeal was denied and the dismissal affirmed. In July 2019, Lee Pederson filed another lawsuit in the U.S. District Court in Minnesota against co-defendants the Company, Dr. Frost, and Daniel Fisher. In his complaint, Pederson alleges tortious interference by the Company and Dr. Frost with the collaboration agreement between Mr. Pederson and Mr. Fisher. Mr. Pederson seeks damages in the amount of $800,000 or such other amount as may be determined at trial. This lawsuit had previously been stayed by the court, pending disposition of Pederson’s first lawsuit. With that first lawsuit having been dismissed and appeal denied, the stay was lifted, and the Company was served in July 2020 with the complaint initiating that second lawsuit. The Company is reviewing the complaint with counsel.

 

On May 19, 2020, A.G.P./Alliance Global Partners (“AGP”), which had previously acted as the Company’s underwriter, placement agent and sales agent in connection with the Company’s registered and exempt equity offerings, filed a lawsuit against the Company in the United States District Court for the Southern District of New York alleging violation of a lock-up provision under the Placement Agent Agreement, dated January 28, 2020 (the “Placement Agent Agreement”), by and between the Company and AGP. AGP seeks (i) damages estimated in the complaint to be in excess of $1 million and attorneys’ fees, and (ii) declaratory relief. The Company has filed a motion to dismiss the complaint.

 

  8  
 

 

ITEM 1.A RISK FACTORS

 

The information presented below updates, and should be read in conjunction with, the risk factors and information disclosed in our Annual Report on Form 10-K for the year ended December 31, 2019.

 

Our Coronavirus program is in the preclinical stage and we face significant competition from multiple parties pursuing the development of an effective COVID-19 treatment or a vaccine, some of which have significantly more advanced product candidates and substantially more resources. If we fail to gain market share as the result of our competitors developing and successfully commercializing effective COVID-19 therapies or vaccines more quickly than we do, our business and future prospects would be materially and adversely affected.

 

Our COVID-19 program is the preclinical stage. We initiated preclinical studies during the second quarter of 2020 and anticipate .the selection of the lead preclinical molecule in the fourth quarter of 2020. We may be unable to produce an effective therapy in a timely manner or at all. Additionally, we are committing substantial financial and other resources to our COVID-19 program, which may negatively impact our other programs. Further, in the wake of the global COVID-19 pandemic a number of third parties, including large biotechnology and pharmaceutical companies and academic institutions have been conducting research aimed at development of an effective treatment for, or a vaccine against, COVID-19. Some of our competitors have substantially more resources, including government funding, than we do and have existing products in significantly more advanced stages of development. For example, remdesivir, an investigational antiviral agent developed by Gilead Sciences, Inc. (“Gilead”), is currently used for the treatment of hospitalized patients with severe COVID-19 symptoms pursuant to an emergency use authorization granted by the U.S. Food and Drug Administration, and Gilead earlier announced that it could spend as much as $1 billion on remdesivir in 2020. If we are unable to timely advance our Coronavirus program or if we fail to gain market share as the result of our competitors developing and successfully commercializing effective COVID-19 therapies more quickly than we do, our business and future prospects would be materially and adversely affected.

 

The COVID-19 pandemic may have a material adverse effect on our business.

 

We have experienced delays in our supply chain and with service partners as a result of the COVID-19 pandemic. Because the full impact of the COVID-19 pandemic remains uncertain, it may have material adverse effects on us in a number of ways including:

 

  If our scientists and other personnel (or their family members) are infected with the virus, it may hamper our ability to engage in ongoing research activities;
     
  Similarly, we rely on third parties who can be similarly impacted;
     
  If these third parties are affected by COVID-19, they may focus on other activities which they may devote their limited time to other priorities rather than to our joint research;
     
  We may experience a shortage of laboratory materials which would impact our research activities;
     
  As a result of the continuing impact of the virus, we may fail to get access to third party laboratories which would impact our research activities; and
     
  We may sustain problems due to the serious short-term and possible longer term serious economic disruptions as our economy faces unprecedented uncertainty.

 

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

 

All recent unregistered sales of securities have been previously reported.

 

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

 

None.

 

ITEM 4. MINE SAFETY DISCLOSURES

 

Not applicable.

 

ITEM 5. OTHER INFORMATION

 

None.

 

ITEM 6. EXHIBITS

 

The exhibits listed in the accompanying “Exhibit Index” are filed or incorporated by reference as part of this Form 10-Q.

 

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EXHIBIT INDEX

 

Exhibit       Incorporated by Reference    

Filed or

Furnished

No.   Exhibit Description   Form   Date   Number   Herewith
3.1   Certificate of Incorporation, as amended   10-Q   8/9/18   3.1    
3.2   Bylaws   8-K   12/1/14   3.4    
10.1   License Agreement dated April 19, 2020, between the Company and Kansas State University Research Foundation*               Filed
31.1   Certification of Principal Executive Officer (302)               Filed
31.2   Certification of Principal Financial Officer (302)               Filed
32.1   Certification of Principal Executive and Principal Financial Officer (906)               Furnished**
101.INS   XBRL Instance Document               Filed
101.SCH   XBRL Taxonomy Extension Schema Document               Filed
101.CAL   XBRL Taxonomy Extension Calculation Linkbase Document               Filed
101.DEF   XBRL Taxonomy Extension Definition Linkbase Document               Filed
101.LAB   XBRL Taxonomy Extension Label Linkbase Document               Filed
101.PRE   XBRL Taxonomy Extension Presentation Linkbase Document               Filed

 

* Portions of this exhibit have been omitted as permitted by the rules of the SEC. The information excluded is both (i) not material and (ii) would be competitively harmful if publicly disclosed. The Company undertakes to submit a marked copy of this exhibit for review by the SEC staff, to the extent it has not been previously provided, and provide supplemental materials to the SEC staff promptly upon request.

 

** This exhibit is being furnished rather than filed and shall not be deemed incorporated by reference into any filing, in accordance with Item 601 of Regulation S-K.

 

+ Exhibits and/or schedules have been omitted. The Company hereby agrees to furnish to the SEC upon request any omitted information.

 

Copies of this report (including the financial statements) and any of the exhibits referred to above will be furnished at no cost to our shareholders who make a written request to our Corporate Secretary at Cocrystal Pharma, Inc., 4400 Biscayne Blvd, Suite 101, Miami, FL 33137.

 

  10  
 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

  Cocrystal Pharma, Inc.
     
Dated: August 06, 2020 By: /s/ Gary Wilcox
    Gary Wilcox
    Chief Executive Officer
    (Principal Executive Officer)

 

Dated: August 06, 2020 By: /s/ James Martin
    James Martin
    Chief Financial Officer
    (Principal Financial Officer)

 

  11  

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